THE possible occurrence of the El Niño phenomenon and a looming power shortage this year may cause commodity prices to spike in the immediate term, according to the National Economic and Development Authority (Neda).
Neda Director General and Socioeconomic Planning Secretary Arsenio M. Balisacan said the lingering possibility of El Niño occurrence in the first quarter of 2015 poses risk of faster inflation within the immediate term.
“Programs to increase productivity and ensure the sufficiency in the supply of key commodities are needed. Likewise important is addressing the looming power woes and creating better logistics-supply chains to reduce production and transport costs,” Balisacan said.
In February Balisacan said higher transportation costs increased the country’s average inflation rate to 2.5 percent.
The Neda chief said higher transport costs were due to higher oil prices. In Metro Manila commuters also felt the increase in Metro Rail Transit and Light Rail Transit fares.
“The recent increase in oil prices was the result of cutbacks in the production and exploration of international energy firms triggered by soft oil prices. Outlook for prices in the medium term, however, remains modest, given a backdrop of strong world crude-oil supply growth and weak global demand,” Balisacan said.
Balisacan noted that inflation in February was slightly higher than the 2.4 percent posted in January. However, the February inflation rate was still lower than the 4.1 percent posted in February 2013.
The Neda also noted that the average inflation rate for February was within market expectations and the 2-percent to 4-percent target set by the government for 2015 and 2016. Balisacan added that moderate increase in commodity prices was due to the normalization of supply chain and relatively stable peso in the first two months of 2015.
“There were no new major economic shocks, such as adverse weather conditions. The supply chain also normalized, partly due to the easing of port congestion. The peso, likewise, remained relatively stable due to the country’s strong external position,” Balisacan said.
Philippine Statistics Authority (PSA) data showed housing, water, electricity, gas and other fuels posted a year-on-year contraction of 1.1 percent in February 2015, from an annual drop of 2.1 percent in January 2015. However, compared to a year ago, February inflation was significantly higher at 3.6 percent.
Food inflation continued to decelerate in February 2015, from 5.6 percent to 4.9 percent, reflecting softer upward adjustments in the price indices of rice, meat and vegetables. Inflation for rice continued to ease in February 2015, due to more favorable supply conditions and lower farmgate prices.
Balisacan noted that the favorable outlook on the production of agricultural commodities, particularly palay and corn, should further ease local price pressures in the coming months.
PSA data showed that inflation in Metro Manila rose to 2.2 percent in February. A 1.5-percent growth was noticed last month and 2.8 percent in February 2014.
Data showed the higher annual growths were displayed in food and nonalcoholic beverages, and transport indices. Inflation in areas outside of Metro Manila, however, continued to move at a slower pace, at 2.6 percent in February. Inflation was seen at 2.7 percent last month and 4.5 percent during the same period a year ago.